Although the previous system was described as unsatisfactory, the NAO study condemns the Ministry of Justice for underestimating the risks involved, ignoring the dissatisfaction of skilled interpreters and failing to check whether the firm had sufficient qualified staff.

The department's due diligence checks on ALS's bid were "not thorough enough" and the company's initial performance led to many trials being disrupted, the report states.

ALS failed to comply with contractual obligations and more than 5,000 complaints about the service were made in the six months after it began in late January.

"ALS did not have enough staff to deal with bookings and complaints," the NAO report finds, "and some [court staff] calls were routed to the company's Indian call centre, against the terms of the contract. Some trials and legal procedures were disrupted.

"In the first quarter of 2012, 182 trials in magistrates courts were recorded as ineffective because of interpreter availability issues. Though small, this was almost double the number recorded for the same period last year," the report said."The ministry did not warn courts, judges, magistrates and other affected parties about the shortage of interpreters nor tell them to expect any other major problems.

"The contract requires all interpreters to have enhanced Criminal Records Bureau checks. However, many interpreters gave ALS evidence only of standard clearance. ALS did not tell the ministry about this. And specifically regarding claims about experience, ALS did not check, even by sampling, the assertions individuals made about having prior public-sector interpreting experience."

Margaret Hodge MP, chair of the public accounts committee, said: "It is appalling that the ministry awarded ALS a £90m contract to provide a service essential to ensuring the proper administration of justice that was clearly beyond this company's ability to deliver.

"The ministry overlooked its own due diligence process, which showed ALS was simply too small to shoulder a contract of this value. The ministry also took no account of the resolve of many experienced interpreters not to work for this company. Against a target of 98%, ALS supplied an interpreter in only 58% of hearings in February 2012.

"This unacceptably poor performance led to courtroom chaos," the report saidIt forced court staff to interrupt their core duties to find interpreters at short notice and triggered a steep rise in the number of abandoned trials … ALS could not even guarantee that interpreters had undergone mandatory criminal records checks."

A Ministry of Justice spokesperson said: "The National Audit Office is clear that the Ministry of Justice had strong reasons for changing the old interpreter booking system, which was inadequate in several respects. We accept that there were problems at the start of the new contract in January but we have now seen a very significant improvement in performance and are confident that this trend is continuing.

"Figures in the NAO report show that 95% of bookings are now being filled, while complaints have fallen dramatically and we are continuing to push for further improvement. The contract is expected to save the Ministry of Justice £15m a year and we remain confident that these savings will be made."

A spokesperson for Capita said: "What [this report] clearly demonstrates is that ALS has been able to draw upon the resources, skills and track record of Capita following its acquisition by Capita. This has helped ALS to enhance and strengthen the delivery of its service, with over 96% of booking requests now fulfilled, compared to 65% in the first month of the contract. This performance is continuing to improve.

"We acknowledge that, as with the old system, there have been challenges. We are determined to get the service running at full efficiency, providing transparency of opportunity for linguists and fully supporting the MoJ, police and court service.

• This article was amended on 20 September 2012, because the original incorrectly named the subsidiary of Capita providing court interpreting services as Applied Language Services. It is Applied Language Solutions.